Lebanon: Telecom restructuring could leave no room for privatisation

A London-based monitoring group has said that restructuring of Lebanon's lucrative mobile phone market could harm any potential of privatisation in the future.

London-based Business Monitor International said the new proposal by the Telecommunications[2] Ministry to restructure Lebanon’s mobile phone sector would leave little or no room for privatization of this lucrative sector in the future.

“The Telecommunications [Ministry’s] proposed structure for Lebanon’s mobile phone[3] sector would meet the government’s revenue targets, but is not likely to stimulate innovation or raise the usage of telecom services in the country,” BMI said, as reported by Lebanon This Week, the economic publication of the Byblos Bank[4] Group.

It noted that the new structure consists of merging the mobile network infrastructures of the existing state-owned operators touch and Alfa into a single platform, and then licensing three to five private firms to operate as Mobile Virtual Network Operators that offer retail services to customers.

But the report did not say when this plan would be implemented or whether it had received the approval of the all the ministers.

It added that the model proposed government ownership of the single network infrastructure, with the possibility of floating a stake of up to 3 percent on the market.

Some investors and telecoms experts[5] have been pressing the government to sell part of the cellular networks to private companies and list part of these shares in the bourse.

But the concept of privatizing the telecoms sector was shelved indefinitely after successive governments failed to persuade leading parties to sell the state’s assets to private firms.

BMI said that the proposed new model for Lebanon’s mobile sector failed to adopt privatization or introduce competition to the market, mainly on the network operator level.

It pointed out that the new model ignored the fundamental need for private investment and competition at the network operator level, even though it allowed competition between the MVNOs at the retail level.

It said the new structure would allow the government to maintain control of key network strategies, including geographical coverage and technology upgrades, which would prevent retail service providers from introducing unique services and new value propositions.

It added that the pricing ability of retail operators would be limited under the proposed structure, as the state-owned infrastructure firm would impose a uniform rate for capacity.

BMI attributed the government’s decision to retain control of the telecommunications sector to its need to secure revenues from telecoms services.

It said touch and Alfa[6] posted total revenues of about $1.6 billion in 2011, of which $1.4 billion were directly transferred to the government.

The telecoms revenues have allowed the government to reduce the budget deficit to reasonable levels.

BMI noted that these revenues, along with those of the state-owned landline and Internet services provider, accounted for about 40 percent of the country’s national income in 2011.

BMI expected mobile penetration in Lebanon to reach 100 percent by end-2016 relative to 78 percent at the end of 2011.